Here We Go Again

Mon, May 13, 2013 - 11:28am

Another week in the barrel begins. There's a lot going on so come on in.

Jeez, where do we start on this fine Monday? Maybe we should start this week where last week ended? You'll recall that, back on Thursday, some hedge fund deltabravo whom nobody had ever heard of, posted a tweet that Jon "BernankButtBoy" Hilsenrath was about to release an article discussing how The Bernank might go about "tapering" QE∞. Though clearly the real object of this scam was to talk down an overheated stock market just a bit (think Mr. Andrea Mitchell and his "Irrational Exuberance" talk back in the 90s), the impact it had on gold was instantaneous. The Comex closed on Thursday at 1:30. The offending tweet came out at about 2:00. Before gold could re-open on the Comex at 8:20 on Friday, it was down over $40. Very nice. And then, of course, in order to not dampen the spirits of the HFTs too much, the ButtBoy article didn't actually get released until after the NYSE close on Friday. The impact? As I type, gold is still down about $35 from Thursday's close. Equities, of course, are about unchanged.

And this has once again emboldened the shorts to drive price lower as they rightly feel that all of the momentum is on their side. As we start the week, the metals look almost certain to test hoped-for support, gold around $1400 and silver near $23. From there, maybe CIGA BoPelini will be right and all of this madness will end. ( That'd sure be nice but I'm not getting my hopes up too high.

If you missed my CoT summary from Friday, you can find it here: There wasn't a lot of earth-shattering stuff in there this week but I want to re-emphasize some points I made toward the end of the comment. Look at these facts:

Finally, lets once again compare the Cartel net positions of last Tuesday with The Cartel net positions of 9/11/12, just two days before the announcement of QE∞.

  • On 9/11/12, The Gold Cartel was net short 237,091 contracts. That's 23,709,100 troy ounces or a whopping 737 metric tonnes of paper gold.
  • As of last Tuesday, The Gold Cartel is net short 87,719 contracts. That's 8,771,900 troy ounces or just 272 metric tonnes of paper gold. A reduction of potential settlement obligation of over 63%.
  • On 9/11/12, The Silver Commercials were net short 47,272 contracts. That's 236,360,000 troy ounces of silver, which is a whopping 7,351 metric tonnes of paper silver or about 30% of global silver mine production for 2012.
  • As of last Tuesday, The Silver Commercials were net short 14,456 contracts. That's 72,280,000 or 2,248 metric tonnes of paper silver. A reduction in potential liability of over 69%!!
  • And finally, here's the most interesting comparison. On 9/11/12, the Silver Commercials were:

    • Long 32,206 and
    • Short 79,478

    Nearly eight months, $450B new QE dollars and $13 in silver later, the Silver Commercials are:

    • Long 65,703 (+104%) and
    • Short 80,159 (+0.85%)

    Look, I am 100% convinced that everything that has happened since mid-September of last year has been completely designed by the Bullion Banks in order to reduce/eliminate their net short positions. After the HUGE rally of August into September 2012, where silver moved from $26 to $35 and gold from $1600 to $1800, The Bernank literally caught the banks with their shorts down, unprepared for the game-changer that is QE∞. Since then, in a increasingly desperate drive to reduce their liability, the banks have successfully moved paper prices lower, even in the face of the extraordinarily strong fundamentals, by convincing the Specs to sell through coordinated raids and chart-painting. Soon the fundamentals will overwhelm everyone but look again at what the banks have been able to accomplish.

    They were net short an astounding 737 metric tonnes of paper gold at the time QE∞ was announced. As of last Tuesday, they've trimmed that liability by over 63%, all the way back to about 272 metric tonnes. Look at this another way. All the way down from $1800, the banks have been buying and covering. We're now told that the "bull market in gold is over" yet the banks continue to buy, not sell. Doesn't that tell you anything?

    Now consider silver. Yes the picture looks the same. The banks have reduced their net short position by more than 2/3 from 30% of annual silver production back to 10%. But that's not the story, now is it? Look again at the gross numbers. At $36 silver, the banks (mainly JPM) were short 80,159 contracts. As of last Tuesday, with silver at $24, the banks were short 79,478. Virtually unchanged. But look at the "other commercials", the "everyone but JPM crowd", the "raptors" as Uncle Ted calls them. When silver was $36, they were long a gross total of 32,206. As of last Tuesday, the size of that position had more than doubled to 65,703! Again, I ask you:

    • If silver is in a "bear market", why are these insiders buying?
    • As silver has been beaten lower, why have these commercials been buying and not selling?
    • Going forward, do you want to side with them or with the Large and Small Specs?
    • Which side, the commercials or the specs, will be proven right in the end?

    OK, moving on. Recall that there was much interest that the GLD had actually added metal back on Thursday. This caught nearly everyone by surprise as it was the first addition of metal since February. Well whaddayaknow. On Friday, nearly the exact same amount of metal came right back out of the GLD, leaving it with a 2-day net change of +0.18 metric tonnes. With the hammering that gold took on Friday, you can imagine that the "inventory" downtrend resume in earnest later today. For your reading pleasure, here's the latest from our pal Alasdair Macleod at GoldMoney. He has issues with GLD, too, and he cites a few of them here:

    And this is fun. I remember that not too long ago, folks like me were thought of as Loons and TinFoilHatters for suggesting that the days of dollar hegemony were numbered. Well, lookyhere. Even ole CNBS is now getting in on the act: Of course, they still don't explain it as well as John Butler did a year ago: And isn't the anti-gold bias just amazing? Nowhere in the article is it even postulated that perhaps the reason China is hoarding so much gold is because they are planning to back the yuan with gold as a fiat alternative. In a competitive global economy, wouldn't that make the yuan far more valuable than ever-devaluing fiat? And wouldn't that competitive edge be the impetus to establish the yuan as a World Reserve Currency much faster than without a gold backing? Ahhh...I digress. That type of out-of-the-box thinking is just craziness, isn't it? Well, we'll see.........

    OK, that's all for today. Have a great Monday and let's just hope that we don't get the tests of support that appear to be coming.


    About the Author

    turd [at] tfmetalsreport [dot] com ()


    May 13, 2013 - 11:30am
    May 13, 2013 - 11:31am

    Condolences to Puck's family

    I didn't know him well but my condolences to his family. Soldier on Turd. Time to do some reading.

    May 13, 2013 - 11:31am


    Even a blind squirrel...................................

    Furst for the first time, Thanks Turd for your dedication and hard work.

    Now off to read the goods.

    May 13, 2013 - 11:31am

    Indian gold imports likely to exceed last year's level to 900 to

    Last year, India, the world's largest consumer, imported 860 tonnes of the precious metal, while demand stood at 864 tonnes in the same year. NEW DELHI: India's gold imports are likely to exceed last year's level to around 900 tonnes in the current calendar year on higher demand despite government curbs on its shipments to rein in current account deficit, a top official of World Gold Council said today. Last year, India, the world's largest consumer, imported 860 tonnes of the precious metal, while demand stood at 864 tonnes in the same year. "Looking at the trend in the initial 4-5 months of this year, we expect gold demand and imports to be higher than the last year at around 900 tonnes," World Gold Council (WGC) India Managing Director Somasundaram PR told PTI.

    Fr. Bill
    May 13, 2013 - 11:32am

    Thurd's the best I can do ...

    .... but you take what you can get!

    May 13, 2013 - 11:34am
    May 13, 2013 - 11:34am


    Hello Fellow Turdites. Just wanted to let you know that my site SRSrocco Report is now live today. This is one of the posts on the site:

    THE BIG FALLACY: Silver Trading More Like A Base Metal

    The notion that silver has been recently trading more like a base metal is more a fallacy than fact. Some of the top technical analysts have been stating that the reason why the price of silver has not held up as well as gold is due to the fact that silver trades more like copper than gold. Basically, if the "King" of the base metals suffers... so will silver. While this makes good press, the reality is much different if we look at the data below.

    Below is a one year chart of the price of silver:

    Here we can see that when the FED announced QE3 on Sept 13, the price of silver was $33, but by May 6, 2013, the price had fallen to $24. This was a 27% decline in 9 months. Gold fell from $1,700 to $1,450 in the same time period (14% decline).


    THE BIG FALLACY: Silver Trading More Link A Base Metal

    May 13, 2013 - 11:36am

    And re Puck

    Puck did, in fact, succumb to his cancer last month. More info here:

    May 13, 2013 - 11:37am
    May 13, 2013 - 11:44am

    Btw, Tabberto...

    This was great:

    C&P below:

    Submitted by Tabberto on May 11, 2013 - 2:02am.

    So, this week I met with a very successful hedgefund (compounding 11% yoy and minimum $1m buy-in). These guys are smart as shit but as is often the case are utterly ignorant of gold machinations. To be fair to them they were all ears, but I think they perceive Gold to be 'too simple' an investment. A small allocation in futures and options sure but physical - no chance. It hadn't occurred to these guys that there might be a fiddle going on and when I ran them through Turdville 101 they were aligned with the basic logic of it. These guys are VERY concerned by what they call 'the plumbing' of markets but are loading up on cheap tail risk so that as and when we have panic again they would clean up.

    Further to that, BMO sent me a 'research' note on Gold which was simply an instruction to sell because GOFO was turning lower......and a recommendation to visit FT Aplhaville for insight into why Gold is backwardated. To say this pissed me off was an understatement so I engaged in a lengthy reeducation process with the BMO analyst. Kaminska at the FT does NOT understand Gold leasing, she seems to be confusing it with swapping, but either way the idea that an investment bank would sent its clients to FT Alphaville's biased opinion blog (and wow is she biased against 'Gold conspiracy theorists') is a genuine new low in Investment Bank coverage of Pmetals. Anyway, I challenged BMO to borrow Gold at a negative rate (by inference what Alphaville and he was claiming is going on) and have had nothing but tumbleweeds. They rely on GOFO but fail to understand the spread on GOFO itself is 5bp - unless you are subscribing to Sandeep Jaitly's Basis Service and are aware of the maths that goes into judging the cash Gold market you are necessarily going to misjudge the movements of the wizards behind the LBMA curtain. The analyst even had the cheek to tell me he put his 'note' out to ensure people remain in their jobs - didnt seem to understand that he might be wrong (!) and accentuating the problem by getting fund managers to puke at the exhaustion lows!

    Anyway, I recommend remembering that the market isn't remotely aware of the near 5 year regulatory investigation into Silver manipulation (that usually gets a somewhat surprised look but no questions ;) )

    The market isn't aware of Central Bank leasing/swapping/dubious Gold accounting practices

    The market isn't remotely aware of how 'price discovery' works in precious metals

    The market isn't aware that Gold and Silver are currencies, they see them simply as overbought commodities

    The market isn't aware that there are already capital controls in place regarding the movement of customer Bullion (switzerland and elsewhere deliveries are only being allowed to other LBMA members, not outside of the playpen beyond $100,000)

    All of this will change in due course guys, it isn't much fun in the meantime but this is our cross and it must be borne with bravery and conviction.

    Key Economic Events Week of 10/14

    10/15 8:30 ET Empire State Fed MI
    10/16 8:30 ET Retail Sales
    10/16 10:00 ET Business Inventories
    10/17 8:30 ET Housing Starts and Bldg Perms
    10/17 8:30 ET Philly Fed MI
    10/17 9:15 ET Cap Ute and Ind Prod
    10/18 10:00 ET LEIII
    10/18 Speeches from Goons Kaplan, George and Chlamydia

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    Key Economic Events Week of 10/14

    10/15 8:30 ET Empire State Fed MI
    10/16 8:30 ET Retail Sales
    10/16 10:00 ET Business Inventories
    10/17 8:30 ET Housing Starts and Bldg Perms
    10/17 8:30 ET Philly Fed MI
    10/17 9:15 ET Cap Ute and Ind Prod
    10/18 10:00 ET LEIII
    10/18 Speeches from Goons Kaplan, George and Chlamydia

    Key Economic Events Week of 10/7

    10/8 8:30 ET Producer Price Index
    10/9 10:00 ET Job Openings
    10/9 10:00 ET Wholesale Inventories
    10/9 2:00 ET September FOMC minutes
    10/10 8:30 ET Consumer Price Index
    10/11 10:00 ET Consumer Sentiment

    Key Economic Events Week of 9/30

    9/30 9:45 ET Chicago PMI
    10/1 9:45 ET Markit Manu PMI
    10/1 10:00 ET ISM Manu PMI
    10/1 10:00 ET Construction Spending
    10/2 China Golden Week Begins
    10/2 8:15 ET ADP jobs report
    10/3 9:45 ET Markit Service PMI
    10/3 10:00 ET ISM Service PMI
    10/3 10:00 ET Factory Orders
    10/4 8:30 ET BLSBS
    10/4 8:30 ET US Trade Deficit

    Key Economic Events Week of 9/23

    9/23 9:45 ET Markit flash PMIs
    9/24 10:00 ET Consumer Confidence
    9/26 8:30 ET Q2 GDP third guess
    9/27 8:30 ET Durable Goods
    9/27 8:30 ET Pers Inc and Cons Spend
    9/27 8:30 ET Core Inflation

    Key Economic Events Week of 9/16

    9/17 9:15 ET Cap Ute & Ind Prod
    9/18 8:30 ET Housing Starts & Bldg Perm.
    9/18 2:00 ET Fedlines
    9/18 2:30 ET CGP presser
    9/19 8:30 ET Philly Fed
    9/19 10:00 ET Existing Home Sales

    Key Economic Events Week of 9/9

    9/10 10:00 ET Job openings
    9/11 8:30 ET PPI
    9/11 10:00 ET Wholesale Inv.
    9/12 8:30 ET CPI
    9/13 8:30 ET Retail Sales
    9/13 10:00 ET Consumer Sentiment
    9/13 10:00 ET Business Inv.

    Key Economic Events Week of 9/3

    9/3 9:45 ET Markit Manu PMI
    9/3 10:00 ET ISM Manu PMI
    9/3 10:00 ET Construction Spending
    9/4 8:30 ET Foreign Trade Deficit
    9/5 9:45 ET Markit Svc PMI
    9/5 10:00 ET ISM Svc PMI
    9/5 10:00 ET Factory Orders
    9/6 8:30 ET BLSBS

    Key Economic Events Week of 8/26

    8/26 8:30 ET Durable Goods
    8/27 9:00 ET Case-Shiller Home Price Idx
    8/27 10:00 ET Consumer Confidence
    8/29 8:30 ET Q2 GDP 2nd guess
    8/29 8:30 ET Advance Trade in Goods
    8/30 8:30 ET Pers. Inc. and Cons. Spend.
    8/30 8:30 ET Core Inflation
    8/30 9:45 ET Chicago PMI

    Key Economic Events Week of 8/19

    8/21 10:00 ET Existing home sales
    8/21 2:00 ET July FOMC minutes
    8/22 9:45 ET Markit Manu and Svc PMIs
    8/22 Jackson Holedown begins
    8/23 10:00 ET Chief Goon Powell speaks

    Key Economic Events Week of 8/12

    8/13 8:30 ET Consumer Price Index
    8/14 8:30 ET Retail Sales
    8/14 8:30 ET Productivity & Labor Costs
    8/14 8:30 ET Philly Fed
    8/14 9:15 ET Ind Prod and Cap Ute
    8/14 10:00 ET Business Inventories
    8/15 8:30 ET Housing Starts & Bldg Permits

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